If you’re looking for a case for why a complex company needs a high-performing board of directors—or even any kind of board of directors—let me submit Facebook, aka Meta, as exhibit ‘A’.
A year ago, the company traded at an all-time high of $376 a share. Now it trades at less than a third of that. The stated reasons are familiar to all those who follow tech—the stalling ad market, the rise of TikTok, the thus-elusive pursuit of the “Metaverse”, etc.
But if you look more closely, you’ll see that all of this has one thing in common: The structure of the company itself. From the very, very beginning, a bet on Facebook has been a pure bet on a single thing: CEO Mark Zuckerberg’s skills, vision and ability to grow as a leader and execute flawlessly. And that’s really it.
That was never a bug, it was always a feature. In writing about the Facebook IPO for Forbes a decade ago, I fretted for investors who perhaps had not dug into the S1 and really considered its implications. The company’s dual-class share structure gives Zuckerberg a 10-to-1 moat on any and all subjects. He controls 50 percent of the voting rights of the board. He can even name a successor to take control of the company in case of his death. (See page 20/21 of the S1.)
He’s hardly alone in creating this kind of setup in Silicon Valley, of course, ostensibly a way to protect against the risk of the founders’ big-picture vision from becoming diluted by those who can’t see the future quite as clearly. But the structure, which essentially turns the board into an advisory group and nothing else, shows the pitfalls for the CEO of not having a true backstop.
Too much of the current ESG debate over-indexes on the E and the S—but Meta is a clear reminder that without the G, there is nothing else. That’s what’s happened to Meta/Facebook over the years. Through Cambridge Analytica, the bubble-building, the social issues, the name change, the bet on the metagoggles and so on. A soaring stock spackled over all these issues, but it clouded the central issue, too.
When Zuckerberg bets the house on himself, it is his house to bet. He really didn’t really shortchange investors—they knew the risks, or at least should have. But he did shortchange himself. Companies as large and complex and central to society as Meta deserve to have a great board of directors, with a wide range of views, opinions and experiences helping guide them. Their CEOs do, too.